Lithium producer SQM advances talks with indigenous communities on environmental issues

Following recent concerns on the use of water for its lithium extraction operations, the Chilean lithium producer Sociedad Quimica y Minera (SQM) is working on a new environmental compliance plan with major stakeholders in the lithium-rich Salar de Atacama desert, including indigenous communities.

SQM’s representatives told Fastmarkets the steps the company is taking to improve the sustainability of its operations in Chile.

In the Salar de Atacama Desert, SQM produces potassium chloride and lithium chloride; the latter is refined into battery-grade lithium compounds at SQM´s chemical plant near Antofagasta port, in northern Chile.

Lithium is a key ingredient in the manufacturing of batteries for electric vehicles (EVs) and energy storage systems (ESSs), and lithium demand for both uses is expected to soar in the coming years alongside the shift to a greener economy.

Environmental concerns
In December 2019, the Chilean environmental court of Antofagasta voided SQM’s environmental compliance program (PdC) which was previously approved in January 2019 by the Superintendencia de Medio Ambiente (SMA), the Chilean environmental regulator.

The decision upheld complaints from a few indigenous communities in the Salar de Atacama region which objected the SQM’s PdC approved earlier that year.

Complaints from indigenous communities and environmental groups focused on the New York-listed company’s use of water for its operations.

In early August, the SMA withdrew its appeal process against the decision of the Antofagasta court.

As things stand, SQM is working with the environmental authorities to develop a new PdC.

Until a new plan is agreed, SQM is implementing all the measures committed in the first plan presented to the SMA, it said.

SQM’s use of fresh water and the environmental impact of its operations on the ecosystem of the western part of the Salar de Atacama area were the main concerns raised by a number of indigenous communities.

“There will be no impact on our current lithium expansion plans as we will not use more brine than we currently do. By 2025 we aim to reach 150, 000 metric tons (MT) of lithium carbonate per year - from the same amount of brine and at the same time we already committed to reduce the amount of fresh water we use in our operations notwithstanding that we are already not a water-intensive operation.” An SQM representative told Fastmarkets.

“In the last three years, we have reduced our freshwater footprint by 50% in the Salar de Atacama, while our chemical plant in Antofagasta uses sewage water from the city that is purified by SQM.

“In the same period, our production capacity went up from 48,000 MT per year to 70,000 MT per year.” The same SQM representative said.

Expansion plans
During the earnings call held on August 20 following the release of the company’s second-quarter financial results, SQM chief executive officer Ricardo Ramos Rodriguez reiterated the company’s commitment to increase its global market share in the lithium market by boosting output of lithium carbonate while reducing its production costs.

When asked about how the company achieved lower operating costs, Rodriguez said: “Well, there are several factors that, of course, affect our cost. One that is quite relevant is the exchange rate with the Chilean peso. The Chilean peso has depreciated when compared to last year which is, of course, helping us on our cost.”

“To give you an idea, approximately $400 million or $500 million of our total expenses per year are in Chilean pesos, so that is quite a relevant part of the savings.” Rodriguez added.

During the earnings call, Rodriguez reiterated that SQM is committed to the protection of the environment in the Salar de Atacama.

“Now we are working on modifications to the compliance plan according to the comments of the environmental court. And we hope and we are sure we are going to obtain all the necessary approvals of the new plan in the coming months.”he said.

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